INTRODUCTION: THE PRACTICE OF PERSONAL FINANCIAL PLANNING

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INTRODUCTIONTHE PRACTICE OFPERSONAL FINANCIAL
PLANNING
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THE NEED FOR FINANCIAL PLANNING

• Demographics
• The pig through the snake phenomenon
• The advent of the super middle class
• Increasing average lifespan and the aging of the
  population
• The sandwich generation

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THE NEED FOR FINANCIAL PLANNING

• Economic Complexity
• The explosion in financial instruments
• Increased financial market volatility and
  unpredictability
• The changing nature of health care - HMOs, PPOs,
  POSs
• Changes in retirement funding - DBs,DCs, SSI,
  and DIY
• Changing retirement ages
• Changing tax laws
• Changing pension plans
• Results Changing plans and no plans

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EBRI SURVEY RETIREMENT PLANS AND REALITY
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THE NEED FOR FINANCIAL PLANNING

• Societal Changes
• Labor market changes
• Downsizing, rightsizing, and the disappearance
  of long-term employment
• Reduced employee benefits, greater uncertainty
• Changing attitudes toward post-retirement
  lifestyle
• Changing attitudes toward borrowing
• The trend toward specialization

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CHANGING RETIREMENT PLANSBOOMERS
POST-RETIREMENT PLANS
23 percent
16 percent
35 percent
22 percent
Source1998 AARP/Roper Starch Worldwide, Inc.
study
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THE TREND TOWARD SPECIALIZATION WHAT IS
FINANCIAL PLANNING?

• We could all do our own plumbing - but should
  we?
• Generally Accepted Definitions of Financial
  Planning
• Legal Definitions of Financial Planning
• Professional Designations
• The Publics View

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GENERALLY ACCEPTED DEFINITIONS OF FINANCIAL
PLANNING

• Financial planning is the organization of an
  individuals financial and personal data for the
  purpose of developing a strategic plan to
  constructively manage income, assets, and
  liabilities to meet near- and long-term goals and
  objectives.
• Source Position paper - Institute of Certified
  Financial Planners
• Financial planning is the process of determining
  whether and how an individual can meet his or her
  goals through proper management of financial
  sources. This . . . demands a willingness to
  stay abreast of new financial strategies and
  instruments. The other side of the process
  requires that all the planners knowledge of
  financial strategies and instruments be brought
  to the surface of the clients goals.
• Source Financial Planning A Career Profile,
  Intl. Board of Standards and Practices for
  Certified Financial Planners, Inc.

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LEGAL DEFINITIONS OF PERSONAL FINANCIAL PLANNING
THE SECS VIEW

• A financial planner is a person who does
  business in the following manner
• Provides advisory service regarding the
  management of financial resources.
• Provides analysis of individual client needs.
• Prepares a financial program based on the
  clients financial circumstances and objectives,
  including
• -Present and anticipated assets and liabilities
• -Insurance
• -Savings
• -Investments
• -Retirement and employee benefits
• Additionally, most planners
• Provide special recommendations for client
  action.
• Assist the client in implementing
  recommendations.
• Periodically review the program and recommends
  revisions.
• Source SEC Release 1092